Building's HOA says restaurant not paying its share of fees

Chazaq Farnsworth makes a sandwich for a customer at the Yellow Deli on Pearl Street in downtown Boulder on Monday. (Jeremy Papasso / Staff Photographer)

One year after an attempt to oust Yellow Deli from its home at 908 Pearl Street, the building's owners association is contemplating a move that would severely impact the restaurant's ability to stay in business, operators say.

On Wednesday, owners of units at 900 Pearl Street — which includes offices, retail business and private residences — will vote to more than double the money Yellow Deli pays toward the building's shared costs, including water, sewer, electricity and trash.

Currently, the eatery pays $7 per square foot for those services. The board at 900 Pearl is suggesting raising that to $17 per square foot, adding $16,000 to Yellow Deli's tab every year.

Josh Morgenstern studies for the MCAT test while having a cup of tea at the Yellow Deli on Pearl Street in downtown Boulder on Monday. (Jeremy Papasso / Staff Photographer)

The restaurant, owned and operated by local members of The Twelve Tribes religious group, is utilizing more resources than it pays for, the board has contended. The governing body originally suggested raising the fees to $20 per square foot, based on a study it commissioned to "estimate" Yellow Deli's usage.

The report, by For National Restaurant Consultants of Denver, utilized average expenditures for restaurants in the Rocky Mountain region, as well as estimated earnings for the Yellow Deli.

It recommended HOA fees of $25 per square foot, which would represent more than 60 percent of the costs for the entire building. Yellow Deli occupies about 6 percent of the total square footage.

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Andrew Wolfe, a representative for the business, said the board's commissioned study had several flaws, most notably that it compared Yellow Deli to freestanding restaurants like Applebee's that do not share walls, and therefore have greater heating and cooling needs.

A Colorado Springs-based engineering firm retained by Wolfe backed up his concerns, writing in a letter to the HOA — a copy of which the Daily Camera obtained — that "based on the envelope, the space has no more expense to the association than other units."

"The additional expense to the Association because the Deli space is a restaurant are unknown but likely far less than the 60.31 (percent) of overall utility costs of the building as proposed by NRC," the report concluded.

Wolfe also made note of when the study was commissioned: one month after last year's failed vote to amend 900 Pearl's constitution, disallowing a restaurant to operate there. The measure fell just short of the legally mandated 67 percent majority.

An analysis of total building expenses since Yellow Deli opened in 2011, prepared by Wolfe, showed that, on average, the establishment added $5,000 to costs annually, or about $10 per square foot.

Board president Gordon Gould in an email wrote that the analysis was flawed, as it did not include data from when Yellow Deli's predecessor, Heidi's, was in business. Gould suggested that $17 per square foot was a compromise between the two studies, which Wolfe disputes.

When the starting point for a concession is the consultant's "ridiculous estimate," Wolfe said, it's not a true compromise. "It makes (Gould) look good."

Wolfe has suggested that Yellow Deli's actual costs be determined by installing meters that would measure usage of things such as water and electricity — something he says the board has told him is not possible.

Gould, on behalf of the board, declined to answer questions as to whether or not metering is a viable option. Wolfe said Yellow Deli has offered to pay $17 per square foot until such time as metering can be completed.

A super-majority of nine votes (from a total of 12 owners) is needed to pass the measure. Though Yellow Deli gained four supporters last time, Wolfe said the restaurant cannot be sure of any allies on this measure.

All owners are currently paying double their normal assessment in order to replenish depleted reserves. Everyone else stands to save money by voting to increase Yellow Deli's financial burden.

If that happens, the restaurant will no longer be able to support seven Tribe families, Wolfe said. To stay operational, the group will look elsewhere for funds. A sale of the space would not be possible, he contends, because the new owner would still be burdened with the "extravagant cost" imposed by the board.

"We'll find some way to stay open," he said. "I'm trying to demonstrate to the owners that we are just trying to pay our fair share, but it seems like they're not trying to work with us."

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